John Butterfill: I beg to move, That the Bill be now read a Second time.
	It is a very great honour and privilege to be able to present the Bill to the House. As hon. Members will be aware, I am deputy chairman of the all-party group on building societies and financial mutuals. I am pleased that our chairman, the hon. Member for West Bromwich, West (Mr. Bailey) is in the Chamber this morning, and I pay tribute to what he has done to promote the well-being of the sector and to the work of the all-party group, which recently commissioned a detailed survey of the benefits of mutuality for the British economy. There is no doubt that those benefits are considerable. The mutual sector as a whole plays a vital role in British society, and more than 19 million British individuals—one in three of the population—are members of one or more mutual societies. That is a considerable number, and it compares favourably with other forms of economic participation and mass membership. For example, there are 8 million more members of mutuals than there are listed owners of shares. Mutual organisations have more than three times as many members as trade unions, and 20 times more than political parties—although nowadays that is not terribly difficult.
	There are about 9,000 industrial and provident societies—a term that covers all organisations registered as co-operatives, community benefit societies and credit unions. They range from the Co-operative Group, which employs more than 60,000 people, to football supporters trusts, which may not employ anyone. In total they hold assets of over £65 billion, have almost 10 million members and employ about 100,000 people. There are 60 building societies in the United Kingdom, and collectively they have more than £300 billion worth of assets and employ around 50,000 members of staff. They have about 2,150 branches, 22 million individual investors—although some investors have accounts with more than one building society—and almost 3 million borrowers.
	Friendly societies are the longest established and most numerous type of mutual insurance providers. The larger societies are members of the Association of Friendly Societies, which has 57 societies that hold funds of £15 billion for 5 million members. Not all mutual insurers are registered as friendly societies. Some of the largest mutual insurers are registered as companies, but all have a strong democratic mutual structure dedicated to offering the best deal to their members, rather than external shareholders. These societies collectively represent £8 billion in premiums, which accounts for 6.8 per cent. of the non-life market and 6.4 per cent. of the life market.
	The contrast between a mutual and a company can immediately be seen when we look at how they distribute the profits of their business. They do not pay dividends to shareholders, so they are able to operate on much narrower margins than plcs. That means that, all things being equal, they can deliver better value for
	their customers. They can also influence quite considerably the pricing policy of their competitors. For example, pressure from building societies was the main factor preventing banks from charging for access to cash machines, and a very creditable and successful campaign that was.
	A PA Consulting international study in 2003 showed that the size of the mutual sector in most countries has had a direct influence on the size of bank profits, finding that the
	"profitability of the banking sector is inversely proportional to the market share of mutuals within the banking sector."
	The reputation of the mutual sector is such that one of its leading lights, the Co-operative Group, is the most trusted brand in the UK in the eyes of consumers. That was established in the 2006 research undertaken by the National Consumer Council and AccountAbility, which showed that that group was more trusted than any other high street operator.

Andrew Love: Does the hon. Gentleman agree that in the best buy tables for financial services, such as the cost of mortgages or the rate for savings, mutuals are always at the top of the tables? Is that not why the public trust them so much?

John Butterfill: Indeed. We are presenting the Bill with a view to strengthening the mutual sector and removing some of the disadvantages that it currently faces under present legislation. It is extremely important that we recognise the value that the mutual sector gives to its customers and to the economy as a whole, and the fact that because of historical circumstances it is rather inhibited in what it can do.
	I am fortunate that in my constituency, Bournemouth, West, we have some of the leading financial mutuals. We have the UK headquarters of the Liverpool Victoria friendly society, the largest of all the friendly societies. We also have the Portman building society's headquarters, which is at present the fourth largest, but it is about to merge, if its members agree, with the Nationwide building society. That will become by far the largest building society in the United Kingdom. Indeed, the merger will make it big enough to be extremely competitive with all the major plcs in the banking and lending sector.
	The building society movement has come of age. I remember that back in 1986, not long after I was first elected to this place, we deregulated the building society movement. We had a good debate on that deregulation, which I keenly supported, and it did a great deal to set the building society movement on the right course. We were also right at that time to consider that building societies as financial institutions did not have experience in the capital markets, did not have experience in unsecured lending and did not generally have the sort of banking experience that the clearing banks had. Therefore it was right, for the protection of members of building societies and the public as a whole, that some constraints were imposed on the degree of access that building societies could have to the financial markets.
	That is precisely what we did. We set for building societies a maximum gearing level—borrowing against the assets that they had, deposited by their members—of 50 per cent. Over the years that has worked pretty well. Indeed, until now it has been possible for building societies to operate reasonably adequately within the constraints imposed in 1986. However, the time has come when we need to free them up somewhat more.
	One of the things that my Bill will do is change those 1986 limits and take them up to higher levels of permitted access to the capital markets. That will be dealt with by means of regulations brought forward from time to time by the Treasury. It is no secret that we are talking of 75 per cent., with which all the building societies have said, through their trade body, that they will be entirely happy; I do not think there is a single dissenting building society.

John Butterfill: The hon. Gentleman, with his usual perspicacity, has anticipated my next point. The Miles review, which was commissioned by the Treasury in 2004, raised that very issue. The prospect of an increased demand for long-term fixed rate mortgages, which we are now seeing—because of the increase in house prices, the much more difficult affordability with
	traditional short-term interest rates and the longer terms of mortgages now coming through into the market—makes it important that the current constraints should not adversely affect the market. The building societies that may wish to embrace the new fixed-rate policies have emerged, and if we do not have primary legislation now, it could inhibit the entire operation of the mortgage market.
	The removal of the constraint means, as I say, that the building societies would be in a position to meet whatever changes emerge in the marketplace over the next few years, rather than having their response to market changes constrained by legislation that might by then appear out of date and unnecessarily restrictive. This in no way forces building societies to move in the direction of non-retail funding, and many may choose not to do so, but it gives them the opportunity to do it in the most cost-effective way, funding possible mortgages for their borrowing members. There is no doubt that if building societies were not able to meet the demand, other institutions would take that opportunity.
	If the Bill receives its Second Reading today, it may be necessary to move an amendment in Committee to provide the Treasury with an order-making power, to move the non-member funding limit into secondary legislation, and for the non-member funding ratio to be increased to a fixed level of 75 per cent. That is a matter for the Committee, but I thought that I should mention it now. It is not likely to be a significant constraint for the future.
	Another consideration is the position of the members of a building society and their relationship with the capital markets from which money may be raised. In response to the increased limits, we want through the Bill to help and give reassurance to the members of the societies, so that in the event of a winding up they will rank pari passu with the other creditors. The reason for that is that people who put money into building societies tend to be relatively small investors, not particularly sophisticated in these markets, and who regard a building society as probably the safest and most convenient place for their money. It is therefore appropriate that, because they are not as sophisticated as people who buy shares in banks, for example, they should have an extra degree of protection.
	As I understand it, the Treasury is perfectly happy that that should occur, the societies are very pleased about it, and, interestingly, the capital markets have said that they do not think that this will affect the rate of interest that they charge building societies. I had thought that they might want one or two extra basis points in order to agree to this, but all the indications are that they regard the building societies as so safe and so well run at the moment that they are not likely to increase the charge. One of the main purposes of the legislation is to allow very cheap mortgages to be offered, and that will not be affected by this alteration of priorities, which is entirely desirable. Again, it will be dealt with by means of a Treasury order from time to time, but that is the right way forward and an entirely appropriate safeguard for rather less sophisticated savers.
	That is all dealt with in the second part of the Bill. No investor in any building society, since at least 1945 and probably well before that, has ever failed to get
	their money back before a distribution is made to others. Over the last 60 or so years, building societies have been among the safest of institutions in which to invest.
	All the building societies are covered, along with other institutions, by regulations issued by the Financial Services Authority and by the financial services compensation scheme. Under the scheme, savers are entitled to 100 per cent. compensation for the first £2,000 invested, and above that, they can claim 90 per cent. for the next £33,000, making a maximum claim of £31,700. No building society has ever been in a position requiring the FSCS arrangements to be invoked, and the predecessor arrangements that existed before the Financial Services and Markets Act 2000 were never invoked for building societies, either. Part 2 of the Bill therefore covers a highly unlikely circumstance.
	None the less, it is necessary to describe the two different types of investor in building societies. There is the depositor and there is the investing member or shareholder. Depositors, which are usually financial institutions, are not members of the society and are mostly institutions that operate in the wholesale markets that we talked about earlier. They have no say in the running of the building society. However, the ordinary man-in-the-street investor in a building society does become a shareholder, and as members, such people have the right to receive information about the activity of the society, including the summary financial statement, notification of the annual general meeting and any special general meeting. They can also vote in elections for the board of directors, and frequently have done so, partly because of the activities—undesirable activities in my view—of carpetbaggers in the recent past. Provided that correct procedures are followed, they can propose motions or even stand for election themselves. Again, some of them have succeeded in that objective.
	The depositors are not members of the society and have few of the rights of shareholders. They need not be notified of the annual general meeting, as they are not entitled to attend or vote at that meeting, and they are not automatically sent a copy of the summary financial statement, although generally copies of the document are available from the societies if they ask for them.
	In theory, depositors have more security than shareholders, but in practical terms the distinction is largely irrelevant. Under current arrangements, the depositors would get all their money back, but under the Bill, if there were a shortfall the shareholders would not suffer in comparison with the others.
	The Building Societies Act 1997 imposes restrictions on the categories of deposit accounts that an individual may hold with a building society and, apart from a number of exceptions, individual investors may have only share accounts with societies. Those exceptions, where customers may still open deposit accounts, include current accounts; client or trustee accounts; qualifying time deposits; deposits at overseas branches; and where the society has announced publicly that it intends to transfer its business to a company. Currently, as I said, most depositors are the big wholesale investors.
	The proposals in clauses 1 and 2 will strengthen building societies and enhance the operation of the mutual movement. Clause 3 addresses the transfer of engagement rules. This is a huge opportunity to strengthen the mutual sector. For many years, mutuals in the UK saw themselves as part of their own mini-sector, such as co-operatives, building societies or friendly societies. More recently, they have been seen as part of a larger reality called the mutual sector. Indeed, that was reflected in this House when the original all-party group on building societies expanded its scope, and its title, to become the all-party group on building societies and financial mutuals. That was because we identified the fact that the mutual sector was a movement in itself, with levels of ethics that were greatly appreciated by the general public and levels of performance that were generally better than the performance of the incorporated sector.
	Sadly, membership of the mini-sectors within the mutual movement has continued to shrink, through a combination of demutualisation and business consolidation. Consequently, mutuality is seen as a declining business form, despite its great appeal and its value to consumers and customers. The Bill seeks to increase the strength of the mutual sector.

John Butterfill: As always, the hon. Gentleman is absolutely right. That is the whole purpose of clause 3. As we stand at the moment, it is not possible for a member of one mini-sector to amalgamate with a member of another mini-sector without one of them demutualising, which defeats the point of the exercise. We want to enable those sectors to merge together, provided that they are all mutuals as defined in the Bill, and to do so without losing the mutuality of each of the members. That would create cross-fertilisation between the mini-sectors and help to allow the boards of mutuals that are considering their future status to offer their members alternatives to demutualisation. The capacity to grow, perhaps by merger, is at the heart of clause 3.
	At the moment, the situation is ridiculous. It emerges not out of any devious means of trying to restrict building societies and other mutuals, but out of the original legislation that set them up. The Bill will deregulate the sector and the various pieces of legislation that apply to it so that mergers can take place across the boundaries. For example, it is not currently possible for a building society and a friendly society to merge. One could take the other over only through the demutualisation of the other, which would be crazy. If the Liverpool Victoria friendly society in my constituency wanted to merge with a building society, it could not now do so. Similarly, a co-operative society could not merge with a mutual insurer. Those restrictions are petty, and restrict and restrain the growth and strength of the mutual sector, which is why the Bill seeks to eliminate them.
	The technical term used in the Bill is "engagements", which has nothing to do with putting rings on fingers. At the moment, engagements can be transferred only if the two bodies involved are in the same category. Such events are dealt with under the Building Societies Act 1997 and the Industrial and Provident Societies Act 1965. There are different voting thresholds for transfers between societies and for those who want to demutualise. In some cases—for example, industrial and provident societies—the thresholds are higher. The threshold under the Friendly Societies Act 1992 is the same for any transfer. The Bill would rationalise that situation, largely through the power to make regulations in the future.
	In comparison with the rest of the world, the UK environment currently restricts, or at least does not encourage, new corporate options for mutuals, which compares unfavourably with external competitors. For example, there are huge mutual businesses that operate group structures elsewhere: in France Crédit Agricole is a huge mutual, in the Netherlands there is Rabobank, and in Germany there is DZ bank. Seeing the mutual sector as a series of ring-fenced mini-sectors is too restrictive for the remaining businesses, and it militates against consolidation and strong mutuals.
	Apart from the damage that that restriction does to the continuance of mutuality, the higher voting thresholds can also lead to higher windfall payments being paid to members in order to secure their votes. That involves the bribery of the members—the carpetbagger syndrome—which can happen only through the higher thresholds. That ultimately reduces the capital value of the business, and it is against the long-term interests of members who want to stay with the business post-transfer and continue to enjoy the benefits of mutuality.
	The Bill will give the Treasury a power to make orders to allow different categories of mutuals that want to do so to receive transfers from other categories of mutual society. It would allow Her Majesty's Treasury to treat the transfer of mutuals to other mutuals, or their subsidiaries, as if they were transfers between the same category of mutual. Under the Bill, a building society could be transferred to a subsidiary of an industrial provident society that is qualified to take deposits under the same rules that allow thresholds that pertain to transfers from building society to building society. The same principle could be established for transfers from building societies, industrial and provident societies, friendly societies and mutual insurers. The only exception to that rule is, of course, credit unions, where the nature of their business would preclude them from participating in this type of transfer.
	I believe that that would be an important amendment of the law, which would assist in the cross-fertilisation of mutuals and strengthen the sector with very little legislative change. With the order-making power established, we can envisage Her Majesty's Treasury consulting either separately or collectively on changes.

Andrew Love: I thank the hon. Gentleman for being so generous this morning. With consolidation taking place across the whole financial services sector, if the mutual part of that sector of the economy is to compete with those consolidated businesses, it needs clause 3 to be able to achieve that effectively. Is that not one of the main reasons why clause 3 is so important to the Bill?

Adrian Bailey: Let me start by congratulating the hon. Member for Bournemouth, West (Sir John Butterfill) on securing his position in the private Members' ballot. From the perspective of the chair of the all-party group on building societies and financial mutuals, I am very pleased that he took up this issue, for two reasons in particular. First, it is recognised across the House that he has unparalleled expertise and experience in this area, so the Bill could not be in better hands. Secondly, although he was too modest to say so, he has had previous experience of navigating private Members' Bills through the House. We therefore have the benefit of somebody with considerable financial expertise allied to a certain navigational skill, which, as we all know, is most necessary to guide private Members' Bills through the rocks and obstacles that lie ahead of them.
	The hon. Gentleman made several kind comments about me. Perhaps I should make it clear that prior to coming to this House I had 18 years' experience in the co-operative movement. The values that underpin it are somewhat akin to those that underpin the mutual movement. The Co-operative party has had long-standing political representation, and I am one of those representatives.
	The mutual movement has always been slightly different. When it hit the problem of privatisation 20 years ago, one of the reasons why it had such difficulties was that its unique ethos, structure and value system, and its worth in the marketplace, were under-recognised. The public perceived it to be little different from the banks, and its members could see no reason why they should not go along the privatisation route. As a result, a lot of mutuals privatised and became banks. Happily, what remained of the mutual sector responded positively by clarifying the benefits of mutuality in the provision of financial services. Since then, there has been, if not a renaissance of mutuals, then certainly a consolidation of their position in the market and an increased recognition by the financial press and consumers of the unique role that they play in the provision of financial services.
	Arising out of that experience, we have the all-party group, which has about 170 Members from both Houses and, obviously, from all parties. It is one of the largest all-party groups, which reflects the esteem that the movement enjoys within the House.
	The genesis of the Bill lies in two inquiries that were held by the all-party group and in the Miles report, which has already been mentioned. The all-party group carried out its first inquiry in 2004. Its purpose was to explore and demonstrate the role of the mutual sector in the provision of financial services. It had a Select Committee structure whereby the group interviewed representatives of the movement and of other financial services sectors, as well as commentators.
	The inquiry reached two key conclusions. First, institutions in the mutually owned corporate structure, being owned by the customers rather than the shareholders, offer certain natural advantages over other financial institutions. The crucial advantage is that they do not have to pay dividends to shareholders. An estimate by the Building Societies Association has put the cost savings derived from that advantage at as much as 35 per cent. One can have a cost advantage but still not be efficient. Happily, however, one of the other key indicators of efficiency demonstrated that in providing services to customers the margin between mortgage and savings rates in the past year was typically 1.09 per cent. for mutuals and 1.5 per cent. for plc banks. That is a clear indication that the cost advantage is reflected in the value of service provided for the customer.
	Secondly, the mutual sector, merely by having a presence in the financial marketplace, provides competition that prevents the plc banks from becoming too shareholder-focused, which means not only that it provides better value for its customers but that the non-mutual sector has to pay more regard to its customers and to compete. The mutual sector benefits not only its own customers but consumers requiring services across the whole sector.
	After the first inquiry, it was decided that it would be logical to hold another to assess whether members of the former mutuals that had demutualised had been better served by that process and whether the value of the windfalls that they received after privatisation had subsequently been outweighed by higher costs or lower returns on investment. Again, the group carried out the inquiry in a Select Committee style, interviewing representatives from the mutual sector, from companies that had not demutualised, and from other interest groups, including campaigners for privatisation. The second report, entitled "Windfalls or Shortfalls", was written independently by the Association of Chartered Certified Accountants. It demonstrated that the mutual sector, including building societies and life assurance companies, performed better than their plc rivals in a variety of performance indicators.
	As my hon. Friend the Member for Edmonton (Mr. Love) said, mutuals are consistently placed higher than plcs in the "best buy" tables on a variety of criteria, ranging from savings and mortgage rates on the one hand to annual premium-with-profits policies for insurers on the other.
	In comparing the average standard variable rate mortgage of the top 10 mutual building societies with nine converted societies assessed in September 2005, it was found that the average rate was 6.58 per cent. for former mutuals and 6.37 per cent. for building societies. Again, that is a clear statistical demonstration of the added benefit that mutuality brings.

James Duddridge: I support the Bill and I am particularly grateful to the big hitters on the two Front Benches for being here to listen to my modest contribution.
	It is a pleasure to follow the symmetrically named hon. Member for West Bromwich, West (Mr. Bailey) and I would like to congratulate my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) on securing a place in the ballot. As those who have not been successful often point out, it is simply a lottery. The real skill is in introducing legislation. In that respect, my hon. Friend has been characteristically modest in not mentioning that he has brought three private Members' Bills before the House and that, if this goes through, it will be his fourth—a record for this House of Commons. I am sure that the House would want to congratulate my hon. Friend on that. Members will want to speak to him later about his skill.
	Today's debate is about the building society sector and I would like to commend the Minister, whose speech to the Building Societies Association I read this morning. He referred not just to 200 years of British history, but went back even to Roman history. I hesitate before complimenting him, however, given that politicians sometimes rise to make speeches written by others—as I am sure he in particular will know.
	The Bill's removal of funding limits is certainly a very welcome step. I probed in an earlier intervention on my hon. Friend the Member for Bournemouth, West the level to which he thought it would rise through the Financial Services Authority and the Treasury. It was interesting that a broad consensus seemed to arise around 75 per cent.
	A second aspect of the Bill—dealing with the transfer between mutuals and other structures—is incredibly sensible. It made no sense whatever that the only exit route for a building society was to merge with its exact mirror, or indeed with a PLC. Most mergers nowadays are more mature and they take place not for size reasons but for specialism reasons. It makes more sense for a small building society to merge with a friendly mutual that might typically offer insurance products rather than just lend for mortgages. The Building Societies Act 1986 was a major step forward, but it became evident over subsequent years that some areas needed changing. The Bill certainly brings forward most of those changes.
	I spent a little time in retail banking in the UK and Africa, but I am not an accountant, so I am a little confused about the issue of pari passu—people who deposit money in building societies being placed on an equal footing with creditors. Will the Minister confirm that those people are on an equal footing with people who deposit at banks? My hon. Friend the Member for Bournemouth, West made a comparison in respect of investing in banking shares, but I am not sure that that is the exact comparison that we need. Perhaps the Minister will look further into it.
	I support the Bill, but I was a little concerned when my hon. Friend the Member for Bournemouth, West started talking about it becoming an enabling Bill, allowing the Treasury to introduce changes through negative rather than affirmative resolution. I am not making a party political point, but I have considerable distrust in the idea of handing over more power to the Treasury and the FSA. It will be interesting to explore further in Committee what checks and balances are in place to ensure that the power is discharged reasonably and sensibly.

Andrew Love: I also congratulate the hon. Member for Bournemouth, West (Sir John Butterfill) on bringing forward the Bill. I was not aware that he had been so successful not only in getting private Member's Bills on to the Floor of the House, but in piloting them to fruition, on which I also congratulate him. I congratulate him, too, on choosing this subject for his Bill, which is appropriate. As we see in the Chamber, it has a wide range of support across all sections of the House.
	I do not want to go into great detail about different parts of the mutual movement. Other Members have already done that. Mutuals compete in the marketplace, and many are successful in doing so: there are mutuals that are not successful, and they must take the necessary action to ensure that they become more successful. In many ways, however, the mutual movement, and certainly those parts that will be affected by the Bill, have been and are successful. We hope that the Bill will help them to become more successful.
	Mutuals thrive in the marketplace, but this is not the first Bill to reflect that they face some disadvantage. That disadvantage does not relate to how they compete in the marketplace, but to the legislative framework in which they must operate. In the limited time that I have been a Member of Parliament, significant new measures on company law and the framework for the private sector have been passed by the House, but little has been introduced to reflect the needs of the mutual sector, apart from some private Member's Bills. I hope that, in some small measure, the Bill will begin to create a more level legislative playing field, so that the many successful mutuals can compete even more successfully than they have done up to now.
	My starting point is that we need a mixed economy, not only in financial services but in other sectors. A mixed economy brings real benefits to consumers. Worker co-operatives, mutual insurers and building societies confer many benefits not only on their members but on other stakeholders. The financial services sector of the mutual movement has perhaps been the most successful. As was pointed out by the hon. Member for Bournemouth, West, mutuals are successful not just in this country but internationally. Many mutual financial services organisations look to organisations such as the RABO bank in the Netherlands, which is one of the great success stories showing how mutuality can deliver for both customers and members.
	As many have pointed out today, mutuals also provide a competitive spark in the wider marketplace. For mortgages and mortgage rates as well as for savings rates, mutuals are at the top of the best-buy tables. That benefits not only their own members, but those in other organisations who must compete with the best—and when it comes to those basic services, mutuals and building societies are the best.
	The same applies to policyholders in mutual insurance companies. Organisations such as Royal Liver Assurance, Liverpool Victoria and Royal London are doing a tremendous job on behalf of both their members and the wider marketplace. If I had to single out one organisation, though, it would probably be the Nationwide building society, which goes from strength to strength. At this point I should declare an interest, as a former member of the Lambeth building society who has since become a member of the Portman building society and in the next few weeks will become a member of the Nationwide—of which, in fact, I am already a member.
	My reason for being a member of the Nationwide is the service that it delivers. It employs 16,500 people, mainly in Northampton and Swindon, and it has 1 million customers. Perhaps most important of all, over the last 10 years it has delivered £4 billion of benefits to its members and customers, an enviable record for any organisation, mutual or otherwise.
	But the Nationwide goes much further. It has campaigned on behalf of not just its own consumers and members, but the wider public interest. It conducted a campaign at some cost to itself, pointing out the dangers of taking up attractive short-term fixed-interest mortgages only to pay for them later, and trying to set a standard by which others—including those attempting to compete with it—should operate in the marketplace. It suffered significantly in the early stages of its campaign, but continued its pioneering work in the mortgage market.

John Butterfill: We ought to have known that the Nationwide would act in that way given its former name, the Co-operative Permanent building society, which made clear that its ethics were unquestionable.

Andrew Love: Yes, I do agree. All the evidence shows that a bank account is the gateway to financial services in this country. Clearly, an ordinary cheque account might not be entirely appropriate for low-income consumers for all sorts of reasons, which I shall not go into at present. The basic bank account has been constructed to be an attractive option for people on low incomes. The financial services sector should help to ensure that anyone who wishes to open an account opens the appropriate one, and for those who prefer a basic bank account that option should be available. My hon. Friend is right that, sadly, the evidence is that many organisations in that sector are not doing that with as much enthusiasm as we would expect.
	In terms of other financial institutions, I especially wanted to mention the friendly societies. The hon. Member for Bournemouth, West mentioned the Liverpool Victoria which is based in Bournemouth. It is the largest friendly society. There are 57 such societies in total, with a turnover of about £15 billion, and with about 5 million members. We should not lose our sense of history in respect of the friendly societies. In the pre-war period, the Beveridge report was produced, and its aim was to address the five great wants, as he called them. It led to the creation of the welfare state, but Beveridge did not suggest that the state should lie at the centre of the provision of welfare. He suggested that there should be a major role for what he called voluntarism, which at that time was primarily represented by the friendly societies. They had an enormous membership—in the region of 12 million or 13 million people. The creation of the welfare state—and the delivery of welfare through state mechanisms—contributed to the decline of the friendly societies. However, such societies offered a specific and targeted service to low income consumers, and that has persisted through their period of decline. The friendly societies could greatly help us to achieve our goals, especially that of engendering the saving habit among those who do not save very much. The child trust fund is among the measures already taken to address that.
	All mutuals in this country share a few fundamental principles. First, they share a community purpose. My hon. Friend the Member for Hackney, South and Shoreditch (Meg Hillier) talked about the housing association movement, which consists of industrial and provident societies established for community benefit. The principle of community benefit is a central purpose of all mutual organisations. It inspires the Nationwide and other such organisations to offer a service not only to their members but to the wider community.
	As has been mentioned, the mutuals are owned by their members. There can be confusion about who is an owner or a shareholder and who is simply a depositer. That distinction can be complex, but the reality is that all such organisations are owned by their members, rather than by a separate group of shareholders.
	They also have a democratic voting system. That has not been talked about, but the principle of one member one vote lies at the heart of mutual organisations. It is an important principle that we should try to uphold because what such organisations have tried to achieve for their members and society in general is based on that principle.
	There has been much change. Members have mentioned the changes brought about by the Building Societies Act 1986 and the movement towards deregulation. In the early 1980s we got rid of exchange controls, and in the mid-1980s we had the big bang in the City of London, and it was almost inevitable that that would feed through and have an impact on the building societies and the housing association movement. The result was the 1986 Act, which introduced the opportunity to demutualise. We have had many arguments subsequently about whether demutualisation gave the members of that generation a short-term benefit but at the cost in the longer term of the society and future generations of its members. I do not wish to rehearse those arguments with the hon. Member for Bournemouth, West, but I think that we both agree that many people lost out because of the blandishments offered in respect of what was a short-term benefit. The current members of demutualised societies are living with the consequences of that.
	The Abbey National demutualised in 1989, and the Cheltenham and Gloucester followed in 1995. The big year for demutualisation was 1997—that was the year of the demutualisation big bang. The Woolwich, the Halifax, the Alliance and Leicester and Northern Rock all demutualised in that year. Bradford and Bingley demutualised in 2000. That was the last demutualisation; seven years have now past without one.
	What has happened to all the societies that demutualised? First, a number of them have disappeared from the high street—they have been taken over and consolidated into other organisations. As the hon. Member for Bournemouth, West said, many banks found it convenient to buy a building society or a demutualised mortgage bank in order to gain their expertise and to be able to deliver new services in the marketplace, and that was sensible. Some societies have gone from strength to strength; that is the case in respect of the Halifax, because it was a large organisation. The one major success in the demutualised sector has been Northern Rock, and I shall return to that point shortly.
	It is worth repeating that the organisations that demutualised produced a great stream of statements about what they were going to achieve by demutualisation, but, disappointingly, almost none of that has been achieved. Most organisations still provide the basic financial services that mutuals provide. They have not got into the broader areas of financial services—the more sophisticated high risk areas, which some of them have tried and failed to get into. If such organisations continue to provide those basic financial services rather than provide more sophisticated services, by far the most appropriate structure for them to have is a mutual one because in that case they do not pay shareholders and they can deliver the benefit to the people they represent.
	Demutualisation has been a disappointing experience: not an entirely negative one, but, generally, the demutualised societies have not achieved what they set out to achieve. One cannot escape coming to the possible conclusion that demutualisation was undertaken for the benefit of senior employees and that it has been of very limited benefit for some of the members. That was done in accordance with the spirit of the age, and we may well now be living with the consequences of that.
	Nothing has happened since 2000. Has demutualisation run its course? Only time will tell. Interestingly, in 2005 a part of the old Bristol & West was re-mutualised, so we are beginning to see the reverse process. Someone said to me, "Was that the first remutualisation?" It may have been, but it was not the first conversion from company to mutual. If one goes back through the aeons, one discovers that Standard Life was originally a company that became a mutual, only to demutualise in the past few years. It will be interesting to see whether in 20 years' time, Standard Life may consider it advantageous to it, and to its policyholders, to become a mutual again.
	Although there has been consolidation within the building society movement in the past five or six years, the number of societies has decreased from 65 to 63. However, as several Members have said, the expectation is that the consolidation process will speed up, and we hope that the Bill will give that process impetus. The level of consolidation so far has been small, but interestingly, between 2001 and 2005 the number of full-time employees increased from 28,000 to 35,000. In 2001 there were 9,000 part-time employees; now there are 12,000. Moreover, funds from mortgage advances have risen from £31 billion to £59 billion, so we can say with some certainty that although the number of societies in the movement may be decreasing, the number of employees—and, more importantly, the number of customers and member mortgages—is growing very quickly. Indeed, the Nationwide is a very good example in that regard.
	Can the Bill help that process? I certainly think it can, and that it will create a stronger and much better mutual movement. As others have said, the Bill has three important clauses. Clause 1, which everyone has discussed, deals with the relaxation of non-member funding limits for building societies. The Building Societies Act 1997 resolved this issue by creating the 50 per cent. limit. In a sense, it was a mopping-up measure that tried to create a level playing field for a building society movement that had been under severe attack since 1986 from carpetbaggers and others, who I think we can say were not primarily concerned with the best interests of the movement. The Act was meant to address that issue, and it created a permissive regime and increased the regulator's powers to ensure that everything was done properly and transparently. It increased accountability to society members. Numerous societies rarely contacted their members or had any conversation with them, and the Act corrected that.
	The 1997 Act also introduced the 50 per cent. member funding limit, and since then, there have been occasions when people—and, indeed, the movement itself— thought that an inappropriate constraint. The Miles report comments on that issue in several different ways. That provision can limit the amount of mortgage business that a society can do, which can therefore have an effect on the competitive pricing of their mortgages. It must be stated clearly that on occasion, it can be cheaper to go to the wholesale market than to raise the money from one's own members. That brings me back to the one demutualisation success story: the Northern Rock. As part of its demutualising strategy, it took in enormous funds from the wholesale market, created a much more efficient organisation and leant those moneys back to mortgage holders. The strategy was successful for the Northern Rock, and my strongly held view is that if building societies are given the flexibility that clause 1 provides, it will be successful for them, too.
	The other reason for clause 1 is the growing trend towards fixed-rate mortgages, which at the moment are relatively short-term. People have a three or five-year fixed-rate mortgage, and then go on to something different. As I said earlier in discussing Nationwide, people must consider carefully what is their best interests. However, there is a trend for moving to long-term fixed-rate mortgages, which the Government would like to foster. One can see many benefits to mortgage holders in having a fixed rate and knowing how much they will pay in future, and if we go in that direction, it will have implications for societies based mainly on short-term members' funds.
	The Miles report goes into that subject in great detail, and if the Government want to sponsor a move in that direction, we must create the conditions for building societies to compete in those circumstances. Clause 1 offers that opportunity, and it will deliver a competitive building society movement. It will also allow them to issue more mortgages—to follow the Northern Rock strategy of building the business, and by doing so, creating a more competitive business. I therefore strongly support the clause. It is a very important step in the creation of a level playing field for mutuals and the rest of the financial services sector.
	Clause 2 would rebalance the relationship between members—those who own the business and who, in many cases, will be depositors—and non-members. The issue is not just wholesale funds, however. One need only speak to someone at the Nationwide building society to realise the full complexity of the situation, in that some depositors are members and therefore shareholders, and others are not. The reality is that taking in a large group of new depositors—in others words, wholesale funds—changes markedly the relationship between those depositors and the people who are also members and shareholders, and who, in normal circumstances, therefore come last in the pecking order should the society be dissolved.
	Everybody has made this point, but let me make it again. No member of a society has lost out in any transfer of engagements or in any building society dissolution since the second world war. It is one of the safest investments that anybody can undertake, so we are discussing only a theoretical possibility—but of course, theory sometimes becomes reality. If it did, it would be inappropriate for members, who in many cases are depositors, not to stand on a level playing field with those who deliver wholesale funds. Otherwise they would almost certainly lose their capital in a dissolution, because they would come last. That would not be right, and by saying that the consumer will be protected, we are standing up for the consumer.
	The hon. Member for Bournemouth, West has already made the point, which others have confirmed to me, that the wholesale markets will not look negatively on allowing such a privilege. They will still deliver wholesale funds at a competitive rate and in a way that allows building societies to continue to compete with the rest of the financial services sector, because building societies are such a blue-chip investment.
	I now come to clause 3. I know that many people see clause 1 as the most important, but clause 3 is at the core of what we are trying to achieve. I mentioned earlier that we have an anomalous situation in law in this country, in that any mutual from any part of the mutual sector may demutualise and become a private company, but may not transfer its engagements to another part of the mutual sector. It makes no sense that a building society may not join with a co-operative or a mutual insurer. The legislative playing field should be level so that organisations owned and controlled by their own members may take the decisions that they believe to be most appropriate for them.
	If any such organisation said to its members, "You have a choice: you can either demutualise and join with an ordinary bank or other financial institution, or you can remain mutual and join another mutual in a different part of the financial services sector," I cannot imagine that people who have owned and controlled that society for generations would not prefer to remain mutual. That is what I mean when I say that there should be a level playing field, which would increase the options available to members when they decide such matters and would help to maintain and strengthen the mutual sector. That is what the Bill is about: strengthening mutuality in this country.
	The mutual sector has gone through a pretty torrid time since 1986, and not of its own making. I assume that the crafters of the 1986 Act never dreamt that what actually did occur would occur. They thought that there would be a sensible rational deregulation of the sector that would benefit consumers. They did not think that out of the proposal for demutualisation would come all that happened in the heady 10 years of carpetbagging, but it did. We have gone through that difficult time and are beginning to rebuild the sector. The Nationwide and other building societies are competing the pants off the rest of the sector, and mutual insurers are showing the rest of the insurance sector how to do it. We need to give them this Bill, and let them do it even better in the future.

Kerry McCarthy: I shall be even briefer now that I have received that response. We have had a full and comprehensive debate, although there are only a few Members in the Chamber. I am sure that the hon. Member for Bournemouth, West (Sir John Butterfill) is keen to hear what the Minister and the Conservative Front-Bench spokesman have to say about his Bill, which I congratulate him on promoting. This is only the second time that I have attended the Chamber on a Friday to debate a private Member's Bill. Last time the Bill's promoter received something of a mauling, so it is a tribute to the hon. Gentleman's experience in this field that there has been such a degree of consensus on the Bill. Congratulations to him, for putting forward such a coherent measure.
	Like my hon. Friend the Member for Hackney, South and Shoreditch (Meg Hillier) and the Economic Secretary, I speak not only as a Labour MP but a member of the Co-operative party. I used to be a director of a co-operative development agency, and am now a proud member of Money-Go-Round, Bristol's credit union, so I very much support the mutual sector—as much for what it represents as for the important role that it plays.
	I support the idea that the financial sector is there to serve the needs of its community. As we have heard from various speakers, that was the origin of the building and friendly societies movement through the self-help initiatives of the 18th century. When I went on a Treasury Committee trip to the United States last year, it was obvious from the community development financial institutions and legislation such as the Community Reinvestment Act that the US still has the ethos that financial institutions should be made to play a role in their communities. That is something that we have drifted away from in this country—a point to which I shall return. It is important to protect mutuals, but we will not do that by preserving in aspic the way in which they operate now. We should do it by introducing incremental changes as necessary, to allow them to survive and flourish in an ever-changing and often challenging market place.
	As we have already heard, previous legislation, including the deregulation of the 1980s, has allowed diversification, but—unfortunately, some would say—it led to demutualisation. We have already heard from my hon. Friend the Member for Edmonton (Mr. Love) about some of the organisations that chose to demutualise. I worked for one of them—Abbey National—shortly after it floated and became a plc. It was very successful as a result, and was the biggest bond issuer in the country at one point. It has had its ups and downs in more recent years, but as an institution it benefited from demutualisation. None the less, it is sad that so many such institutions went down that path.
	When customers of mutuals have been surveyed, it is clear what they perceive as the advantages. They believe that mutuals are much more democratic, in that members have a direct say in decision making and are able to exercise their voting rights. Above all, they are thought to work in the interests of the members, not of the shareholders. In 2001 a survey was carried out by the Consumers Association, which said:
	"Building societies deliver better value for one simple, crucial reason. The priority of the shareholder-owned banks is to keep their shareholders happy by paying large dividends, and increasing profits...we calculate that for every £100 in after tax profit the banks make, about £30-40 of that goes to shareholders as dividends."
	The Centre for Business Research at the university of Cambridge has undertaken an ongoing programme of research into the benefits of mutuals. When it spoke to customers and asked them their reasons for choosing a building society, it was clear that the feeling of ownership was very important to them. The No. 1 reason they gave was the lack of shareholders, which creates a feeling of trust. Customers feel part of the institution to which they entrust their money or from which they borrow money. The CBR survey of the mutuals says:
	"The essential point is that a PLC owes its duties to its shareholders; we owe our duties to our members. It is easy for a PLC to make attempts to blur that distinction...But at the end of the day they are presented with an inescapable fact: the interests (that is, the interests of shareholders and customers) conflict...We only have to consider the interests of members present and future."
	Another point about the mutual sector, the survey said, is that
	"The whole tone, the whole motivation, the whole aspiration is different."
	One point that has not been made so far today is the extent to which credit unions are now filling in the gap left by the mutuals merging or demutualising. My constituency has several credit unions, but most have now merged to form one big credit union, which gives it added strength. In some ways, the credit unions have picked up the mantle of the early mutuals, harking back to their origins, when communities came together to make their own provision and fill in some of the gaps for the financially excluded communities, about which my hon. Friend spoke.
	We learned earlier this month that high street banks' profits have now hit $40 billion. I have no objection to them making such profits, but more should be done to encourage them to reinvest some of those profits in communities through, for instance, promoting basic bank accounts and the free cash machines that other hon. Members have mentioned.
	Earlier this month, Save the Children and the Family Welfare Association published an important piece of research illustrating what they call the poverty premium or the price of being poor in the UK. For example, if people do not have a bank account, they cannot pay by direct debit, so their utility bills are likely to be higher. It was estimated that poor families pay 150 per cent. more for basic household goods bought on credit, more than 50 per cent. more on credit and loans, and 10 per cent. more on gas bills paid through pre-payment meters. The poverty premium for a family of four, with one adult earning £250 a week, was estimated at 9 per cent. of their income. In effect, being poor makes people poorer, because they do not have access to financial products at the same rates as other people. Support for the credit union movement is an important step in tackling some of those issues.
	In my constituency, the credit union benefits from capital and revenue from the Department of Work and Pensions growth fund, which means that it can make loans to people who cannot access them from mainstream financial institutions. Eighty per cent. of those loans have gone to women, 60 per cent. of whom were lone parents. The credit union made a comparison of the costs of a loan from the credit union and a doorstep lender. It was estimated that someone borrowing £500 from Provident Personal Credit—the country's largest doorstep lender—would have had to pay £825 over a year, at an annual percentage rate of 177 per cent., but borrowing from the credit union would cost about £65 in interest over a year. That shows the difference that a small organisation can make in a poor area in my constituency.

John Butterfill: I thoroughly agree with everything the hon. Lady says about credit unions. I was one of the earlier members of the Bournemouth credit union, and am still a member. We are merging with two other local credit unions, as the hon. Lady described was happening in her constituency. I have no doubt that credit unions give a wonderful service in the community I represent. However, I hope that she understands that it was not technically possible to include credit unions in the scope of the arrangements set out in part 3.

Kerry McCarthy: I thank the hon. Gentleman for that intervention.
	The Government last looked at credit union legislation in the very last measure passed by the Labour Government before we lost the 1979 election. Some steps have been taken since then—for example, doubling the interest rates that credit unions are allowed to charge—and I think that my hon. Friend the Economic Secretary is looking into the possibility of introducing more legislation, and I hope that will be done.
	We need to look at the role that financial institutions—whether community development financial institutions or others—can play in lending to the voluntary sector and new businesses in deprived areas. There is a gap in the market that the high street banks are not really meeting. On that note I shall conclude my remarks, as I think it is time for Front-Bench Members to have their say.

Edward Balls: May I start by joining the hon. Member for Fareham (Mr. Hoban) in praising the series of powerful speeches made in support of the principle of mutuality and the principles behind the Bill? I join him and everyone else who has spoken in praising the hon. Member for Bournemouth, West (Sir John Butterfill) for his leadership on the issue. His speech set out clearly and in depth the case for action and for his Bill. It demonstrated a thorough understanding of the issues, and a commitment to the values that underpin the legislation. I am happy to confirm today that, in principle, the Government support the objectives of the Bill. We shall seek the support of hon. Members on both sides of the House in ensuring its smooth passage. I look forward to continuing our fruitful discussions, for which we are grateful, with all interested parties, so that we can ensure that the Bill reaches the statute book.
	It is clear from today's speeches that although commentators in the financial press and more widely are sometimes tempted to talk about the mutual sector's declining role in financial services, the sector is in fact in robust health, and has broad-based support in the House and more widely. Indeed, it is set to expand further in the months and years to come. We have heard excellent speeches from Labour Members, including my hon. Friends the Members for Edmonton (Mr. Love), for Bristol, East (Kerry McCarthy), for West Bromwich, West (Mr. Bailey) and for Hackney, South and Shoreditch (Meg Hillier), who set out the case for mutualism and for the Bill.
	There was support, and detailed questions, from the hon. Member for Rochford and Southend, East (James Duddridge), whose points I shall respond to later, and the hon. Member for Fareham, who pointed out that he has a Co-op in his constituency. That pleased me, and even in his constituency the odd Labour voter might pop in from time to time for a packet of tea or whatever. One of the most important roles that the Co-op plays in my constituency is in providing a welcome shelter from the elements on rainy days in the run-up to elections. It also offers wider support, but we will not go too far into that issue today, because this is a Bill with cross-party support. By cross-party, I do not simply mean the Labour party and the Co-operative party; I also mean the Conservative party, and we are told that there is Liberal party support, too.
	I want to discuss the details of the Bill, but let me start by making a few general references to the strength of the sector. My hon. Friend the Member for Edmonton pointed out the success of the mutual sector in recent years, and he is right; at last year's Moneyfacts awards, mutuals took almost 75 per cent. of the top three places in the nine mortgage categories. The best available rate for five-year fixed mortgages, for instant mini cash individual savings accounts, and for instant access accounts were all offered by building societies, according to a 2005 study. On a subject that is particularly closely related to my responsibilities, child trust fund accounts have been predominantly provided by children's mutual and friendly societies.
	The sector is vibrant, and vital to the British economy and to the daily well-being of literally millions of people in our society. As we have heard today, the sector has a proud history. It is sometimes thought that its origins lie in the self-help tradition of the Victorian era, and people look back to the early years and the work of the Rochdale pioneers—28 men and women who came together from a sense of community and a commitment to solidarity to begin the co-operative movement in Britain in 1844. In fact, history shows that the Romans got there first. It was, in fact, the Romans who first set up mutual insurance societies to provide for death and retirement as early as AD203, so there is a 2000-year history of mutualism. That history continued in mediaeval times with the establishment of craft guilds. The hon. Member for Rochford and Southend, East asked whether my speech to the Building Societies Association was my work. The answer is that it was in part, but it was also a co-operative effort, and I am grateful to the people who provided me with some of the details.
	One of the earliest records of the Treasury's involvement with the mutual sector came in 1829 when, in response to cases of fraud, the Treasury appointed John Tidd Pratt as the first registrar of friendly societies, and tasked him with ensuring both that societies complied with legal requirements and that members' interests were best served. He remained in post from 1829 until 1870, and while the Treasury has not managed quite such dedicated individual service since then, our relationship with the mutual sector has remained strong to this day. As hon. Members have pointed out, I am the first Treasury Minister with responsibility for the financial sector to be a Co-operative party Member of Parliament. I see it very much as my task, working with my fellow Co-operative and Labour colleagues, and with co-operative supporters across the House, to continue the long tradition of mutualism in society.
	Mutualism flourished, particularly in the late 18th and 19th centuries, in the run-up to the establishment of the co-operative movement in the early 20th century. A number of hon. Members have referred to what seemed to be a period of decline in the 1980s and 1980s, and the demutualisation of Abbey National appeared to confirm the view that mutual building societies would be unable to compete with the commercial banking sector. Between 1989 and 2000, nine societies converted into banks, and as we have heard from a number of Members on both sides of the House, carpetbagging became a growing concern. We have tried to respond to some of the concerns in the building society movement about the pressures of carpetbagging by introducing measures, starting with the passage of the Building Societies Act 1997, which amended the Building Societies Act 1986, to increase societies' commercial freedom, to improve accountability and to try to put mutuals on a more equal footing with proprietary companies.
	Over a decade, the Government have introduced nearly a dozen legislative changes covering issues from accounting requirements to electronic communications, including amendments to the law affecting conversion. Before the Bill was introduced, we were pleased to support the three private Members' Bills that updated co-operative legislation. Our aim is not to give mutuality a privileged position but to allow building societies and mutuals to compete on a level playing field. For example, the 1997 Act withdrew the tortuous list of permitted building society investments, which undoubtedly hampered building societies' ability to compete fairly in the marketplace. There were some unwelcome changes in the 1980s and 1990s, but one can argue, too, that the building society sector emerged stronger from that period, rather than weaker. In an improved legislative framework, societies have had to strengthen long-term relationships with their members. Annual general meeting attendance is up and members are being more closely engaged. Building societies have recognised that they have to be businesses and compete in an increasingly sophisticated global market.
	The building society model of the annotated combined code was praised by Paul Myners in his review, and other mutuals have been following the building societies' lead in corporate governance reform. The remutualisation of Bristol & West branches following take-over by Britannia Building Society is just one sign of greater confidence in the sector, demonstrating that it is succeeding and can grow. These trends suggest that the role played by mutuals is not just an accident of history, and that in the face of intense and growing competition mutual financial services providers have proved that they can compete and indeed have some advantages, compared with the profit-making sector.
	First, as my hon. Friends the Members for West Bromwich, West and for Hackney, South and Shoreditch noted, as mutual institutions owned collectively by their members, without external shareholders in the conventional sense, building societies can achieve advantages in efficiency and innovation and operate with lower cost ratios than plcs. Secondly, some mutuals, particularly small mutuals, including small building societies, serve markets that are often ignored by plcs, and can therefore develop local knowledge and engagement that is hard for larger organisations to achieve.
	That can lead to a third advantage, building local loyalty and making a special contribution to local and community life. In the consultation that we are undertaking on the use of unclaimed assets in bank and building society accounts, we have responded sensitively to a particular issue in the building society world by making sure that local and small building societies can use unclaimed assets to continue those links and make a local contribution to community life.
	At a time of rapid change and growing complexity in financial services, and given some of the difficulties that have occurred in the past 10 or 20 years in some aspects of retail financial services, there is a unique trust in mutuals, and they have maintained the reputation that they have historically had. That places them in a strong position to respond to consumers' need for transparency, fairness and the knowledge that they can trust their providers. Members know that across the vast range of mutual societies that exist, they can expect public service and local commitment. Trust is an increasingly valuable commodity in a complex financial environment.
	As more financial responsibility is expected of individuals for personal finance and pensions, the mutual sector can continue to grow in size and capability. For it to do so, we need to ensure that the legal framework within which it operates is fit for purpose. Over decades the legislative framework has not properly kept pace. Co-operatives and credit unions are operating in a framework that dates back many years. The Industrial and Provident Societies Act 1965, which consisted of nine Acts covering the sector, was a consolidation of 19th century legislation. The Credit Unions Act 1979 is almost 30 years old.
	Starting with the Building Societies Act 1997, we have tried to put mutuals on a better footing. Significant changes were made for the benefit of the industrial and provident societies by the Industrial and Provident Societies Act 2002. The Co-operatives and Community Benefit Societies Act 2003 introduced further change. In the last year, the Government have introduced measures to increase the maximum interest rate that a credit union may charge its members. Most recently, last week to the day, we laid before Parliament two statutory instruments proposing amendments to building societies legislation. The first of these deals with the treatment of building societies' offshore deposits and changes to their treatment for the purposes of the funding limit, allowing such deposits to be treated the same as members' shares, up to a limit not exceeding 10 per cent. of the value of total shares in the society. The second enables societies to present their summary financial statements in a form consistent with international accounting standards. Our aim, as I said, has not been to give mutuality a privileged position, but to allow a level playing field.
	To build on the progress that we have made, in November last year I announced that the Treasury would review all co-operatives and credit union legislation. Since then, I have been grateful to all the individuals, societies and trade associations, as well as hon. Members, who have provided valuable advice and constructive ideas to the review, which will lead to a consultation document to be published this spring. Following publication, there will be a 12-week period for formal responses, and we hope to be clear on the final recommendations by autumn this year. I know from the discussions that I have had that the mutual sector attaches high importance to the outcome of that review.
	We do not know whether we will be able to come forward with an omnibus Bill. We will need to ensure that we take advantage of every opportunity that arises to implement the findings of the review, whether through regulatory reform orders or when private Members' Bills present opportunities such as today. That is why the Treasury was pleased to see the hon. Member for Bournemouth, West so high up in the ballot, and in particular that he chose to devote his slot to helping in this comprehensive effort to improve building society and wider mutual legislation. We agree with him and with Members on both sides of the House who have spoken today that this provides an opportunity to improve the competitive position of building societies and to allow them to respond effectively to the needs of their members.
	With regard to clause 1, as hon. Members have already pointed, in particular the my hon. Friend the Member for Edmonton, the Miles review on the UK mortgage market identified a need for building societies to be able to access higher levels of wholesale funding. I refer particularly to recommendation 19 of that report, which advised
	"that Government consider lowering the minimum funding limit by members from the current 50 per cent. 25 or 30 per cent. of building societies' funds coming from members would still represent a substantial source of funding."
	It is clear, as hon. Members have said, that raising the level of wholesale funding would impact on members' rights on the winding up or liquidation of a society, because members' shares are subordinate on a winding up. It is for that reason that the Bill includes clause 2. It is clear, certainly to those on the Treasury Bench, that clause 1 should not be commenced in the absence of clause 2. They stand together.
	Clause 3 is different from the other two clauses, being of a far broader scope. Its aim in attempting to facilitate transfers within the financial mutuals sector is admirable. However, as I have already said, mutuals legislation is complex. The different Acts are not necessarily compatible with each other. Therefore we have been working and continue to work closely with the hon. Member for Bournemouth, West to clarify the issues, which we will seek to address in Committee.
	I shall respond to each clause in detail. Clause 1 proposes to remove the funding limit for building societies. Building societies are constrained in their business operations by the statutory requirement that they raise at least 50 per cent. of their funds in the form of shares held by individual members of the society. The measure proposes abolishing that requirement, which currently restricts the amount of wholesale funding that a building society is permitted to have. Although we fully agree with the need for greater flexibility, we do not consider that removing the limit entirely is consistent with the nature of building societies. That is why we have agreed to discuss with the hon. Member for Bournemouth, West and his advisers an appropriate amendment that substantially increases the level of wholesale funding that building societies are permitted to have, while retaining a requirement for member funding, too. We have discussed the measure at length, and in our view the objective will be best achieved by giving the Treasury, and not the Financial Services Authority as stated in the current long title, the power to increase the permitted amount of wholesale funding to a maximum of 75 per cent.

John Butterfill: I thank the Economic Secretary for his comments and the helpful way in which he and the Department assisted us in preparing the Bill and getting it to its present stage.
	We accept that it may be necessary to table amendments in Committee. Indeed, we have already agreed some of them in principle. I hope that we do not need to revert to affirmative resolution procedure in all cases, but we can debate that at the relevant time. If we need to give the Treasury a longer period in which to consider some of the more detailed aspects that the Economic Secretary outlined in relation to clause 3, there will probably be happy agreement in Committee that we shall do whatever is necessary to get the Bill on to the statute book.
	We have had an excellent debate, with wonderful contributions from all parties, for which I am grateful. The hon. Member for Hackney, South and Shoreditch (Meg Hillier) made a splendid speech. I say to her that, although the co-operative movement arose from the needs of many poor people, other stakeholders also supported it. My mother, who was born in 1898, the daughter of a successful Victorian industrialist, and became a civil servant at the Bank of England, was a keen supporter of the co-operative movement and a member of the Co-operative Wholesale Society for as long as I can remember. However, she always voted Conservative, as far as I know.
	I should like to take the opportunity of thanking a few others. First, I thank the Building Societies Association for its tremendous co-operation and that of its individual members on the Bill. I thank the Association of Friendly Societies and all the other mutual organisations that have been so supportive in getting the Bill this far. It is invidious to single out individual ones, but I must say that the Portman building society in my constituency has been very helpful, as has the Liverpool Victoria friendly society. They put a tremendous amount back into my local community. I have twisted the arm of the Liverpool Victoria to give significant funding to the Youth Cancer Trust, which is a major charity that provides palliative care to young people in my constituency. The Liverpool Victoria has given us a big sponsorship, so I offer it special thanks. However, that is typical of what mutuals do in constituencies throughout the country.
	I give my sincere thanks to Mutuo, whose members are listening to our discussion. Without that organisation, it would not have been possible to get the Bill to this stage. It is a great supporter of everything that we do and of the all-party group. I am extremely grateful to it. With its aid, we may get the measure on the statute book.
	 Question put and agreed to.
	 Bill accordingly read a Second time , and committed to a Public Bill Committee.

Richard Ottaway: I beg to move, That the Bill be now read a Second time.
	It is a pleasure to follow my hon. Friend the Member for Bournemouth, West (Sir John Butterfill). Before the Economic Secretary leaves, may I say to him that, although he is capable of being a controversial figure, we all appreciate the consensual way in which he recognised the abilities of my good friend and colleague?
	I was a Friday Whip for the last two years of John Major's Government, which was not the quietest period in the Whips Office. I am therefore well aware of the limitations of coming No. 10 in the private Member's ballot. One is faced with a stark choice between introducing a measure that is hostile to the Government, then, when it does not get a second's air time on the Floor of the House, issuing a press release criticising some heartless Whip for objecting to it, and searching for consensus through working with hon. Members of different parties on a measure that will, one hopes, improve the lot of the citizens whom we represent. On this occasion, I have chosen the latter course and I am pleased to introduce the Bill today.
	I am grateful for the Minister's co-operation and that of the Department for Transport. I am also grateful for the co-operation of officials in the Driver and Vehicle Licensing Agency—I have not had to bother them too much because the Bill is fairly straightforward. I am only too sorry that I have not been able to get down to Swansea, but I sit on a busy Committee. I would not say Swansea is another land, but it takes quite a while to get down there and back again, so perhaps I can take up the invitation on another occasion.
	I am also grateful to the Cherished Numbers Dealers Association for encouraging me to introduce the Bill and for its fund of stories about the history and complexity of the registration mark system. I am grateful to the Retail Motor Industry Federation for its general encouragement and support, and to Members from all parties for theirs. I stress that the Bill has all-party support.

Richard Ottaway: I can confirm that I have received no communication from the Liberal Front Benchers and I leave it to my hon. Friend to decide which of his three choices to put that down to. In all fairness, the Bill is supported by the hon. Member for Harrogate and Knaresborough (Mr. Willis), who has taken a keen interest in it, but the Liberal Front Benchers have shown no interest whatever. Perhaps the Liberal party is suffering its private grief—in private!

Richard Ottaway: Either that or they are in the process of changing their minds yet again on their attitude towards that issue. I had not spotted the CND connection; perhaps we should award a number plate with that on it to the Liberal Democrats.
	The motor car was the most significant development of the 20th century. It gave a freedom to travel that our forebears had possibly never envisaged; it made access to all parts of the nation possible; it transformed local economies, communities and regions; and it enhanced the country's prosperity. I happen to believe that the motorist is taxed too much, but was there ever a motorist who thought otherwise, and we live in modern times. I also believe that motorists produce too much pollution and I support the Government's efforts to address that problem. However, I am unashamedly pro-motorist and will, in truth, do anything to try and improve his lot, which is why I introduce the Bill today.
	Until I embarked on this legislation, the world of vehicle registration marks was an unknown one and its complexities had never been of concern to me. As I explored the issue, I found that number plates play an important role in regulating the motor car. They are used to identify the car; for purposes of taxation, and—as a number of my constituents never fail to write and tell me—for law-enforcement purposes.
	I often speculate whether a personalised number plate makes it easier to identify a car than a normal number plate. Personally, I suspect that it does, but the reasons why people have personalised number plates are many and varied. The important thing to remember about a number plate is that it is not owned by the owner of the car: it is assigned to a vehicle through a sort of franchise operation, with ownership remaining with the Secretary of State and the Department for Transport. It remains with the vehicle until it is broken up, destroyed or exported. The key point that I invite the House to remember is that the assignment is linked to the owner of the car rather than to the vehicle itself. I will address later the problems that that causes, which the Bill is designed to solve.
	There is widespread interest in personalised number plates. They were first issued by counties at the beginning of the 20th century. In the early days before personalised number plates, the focus was on number plates such as A1. That particular number plate was sold by London county council in 1903 to the second Earl Russell, who queued for the entire night outside the council offices to have the right to be able to buy it. He beat someone else to it by just five seconds. Having acquired it, he sold it to the chairman of the London county council four years later, in 1907. History does not relate whether he made a profit.
	The second Earl Russell was clearly a flamboyant character. If you will indulge me on a grey Friday morning, Mr. Deputy Speaker, I will tell the House how his history possibly reflects on those who buy cherished number plates. He was married three times. After his second marriage, he was charged with bigamy and, as a Member of the House of Lords, became one of the last peers to elect for trial by his peers. After a great amount of deliberation in the upper House, he was convicted, but sentenced to only three months on account of the extreme torture of his first marriage. He subsequently became the first peer to join the Labour party, and went on to hold ministerial office. As Under-Secretary of State for Transport, he introduced the highway code and abolished speed limits. He went on to become Secretary of State for India. The Ramsay MacDonald Government reintroduced speed limits, but they felt that they had to wait until the second Earl Russell had died before they could do so. He was succeeded by his younger brother, Bertrand Russell, who perhaps became more famous.
	My constituents are all, of course, paragons of virtue, but many of them would recognise the character of the second Earl Russell in those who buy personalised number plates. The part of Croydon that I have the privilege to represent has been identified as the wealthiest postcode in Britain, and I have to confess that we have more than our fair share of personalised number plates floating around the leafy suburbs of Purley and Coulsdon. I am pleased to be able to introduce a Bill that will smooth the transfer of such number plates.

Linda Gilroy: I congratulate the hon. Member for Croydon, South (Richard Ottaway) on gaining a place—albeit 10th place—in the ballot for private Members' Bills. I also congratulate him on his choice of Bill. This Bill is exactly what a private Member's Bill should be: it is short, it addresses a narrow point of law, and it deals with a topic which, as he said, matters to a growing number of people. In the three years between 2002-04 and 2005-06, the number of "cherished transfers" rose from some 260,000 to nearly 300,000, and the number of retentions rose from 146,000 to 189,000.
	It is some time since I had a number plate that I might have wished to keep. I was interested to learn about the history, of which I certainly was not aware in the days when I owned my first vehicle, of a Ford Consul Classic with the registration LUO. I confess that my family nickname at the time was "Lulu". My close family thought it highly appropriate, and used to say that Lulu and LUO made a very good duo. I do not imagine that that number plate could have been of any great value to others, although given the tortuousness of the link I have just described and the strange nicknames that people have, who can tell what it might have meant to them?
	Another vehicle, of which I had part-ownership, was a white Mini estate with the registration HOT. The vehicle became known as just that—Hot. I am one of those people who grow rather attached to the cars that they own, and this one, as can be imagined, had a great deal of character. It also gave a great deal of trouble. I was its last owner—part-owner—as it reached the end of its long life. Had I acquired another vehicle at the time, I would probably have considered keeping the number plate and transferring it to the new vehicle. However, that was not to be, and I do not think that in those days people wished to retain number plates on the present scale.
	If I had known of the possibility of retention, I might well have wished to exercise such a right, and had I done so, who knows what difficulties might have arisen in the process described by the hon. Member for Croydon, South? I might have wanted to assign the plate——I understand that that is the correct term——and wash my hands of it as the idea lost its attraction and my enthusiasm waned; meanwhile, a friend might have wanted to keep the option open. I can imagine what a tortuous process might have developed in the passing on of such a desirable number plate.
	While I wish the Bill a speedy passage, I have some worries about it, although I was somewhat reassured by what the hon. Gentleman said about the way in which it would assist in preventing fraud. I served on the Standing Committee considering the Bill that became the Vehicles (Crime) Act 2001, some of whose provisions had a very good provenance. The Vehicle Crime Reduction Action Team was established in 1998; I am not sure whether it still exists, or whether it has been consulted on the Bill.
	Part 1 of the Act included measures to regulate the motor salvage industry. It provided for the keeping of records, and for the police to have the right of entry to examine them. That is of relevance to the Bill. The Act's provisions in respect of the regulation of registration plate suppliers, which include powers to control the supply and issue of number plates, must be taken into account. The Act requires number plate suppliers to register, to make suitable checks before selling a number plate, and to keep records of transactions. Sadly, many criminals using vehicles to carry out criminal activity—such as armed robbery, and burglary as vehicles are used to transport stolen goods—put false number plates on those vehicles to avoid detection. Recently, we have also had to consider deep concerns about terrorists and their activities.
	The Act regulated the supply of number plates in order to combat vehicle ringing and vehicle cloning. It is important to consider the implications of the Bill in respect of both of those undesirable activities. Ringing is the process of giving the identity of legitimate vehicles that have been seriously damaged or written-off to stolen vehicles. Cloning uses the identity of an existing vehicle to disguise another vehicle. The 2001 Act sought to stamp out both activities.
	At that time, there were about 27,000 outlets supplying some 6 million to 7 million plates a year—that amount has probably increased because of increased prosperity and car ownership. About 2 million of those plates were for trade-ins and another 2 million were replacement plates. The volume of business in that area is great, and at that time it was in need of better regulation. Vehicles of a value of £112 million a year were being lost as a result of ringing, and some 20,000 to 40,000 vehicles each year were involved.
	Difficulties had arisen in respect of automatic number plate recognition. The Act sought to ensure that the numbers and letters displayed on plates were of a standard font and size that could be recognised by ANPR devices—a role was beginning to be found for cameras to do that at that time. ANPR has become more important for our security as the terrorist threats have increased; we owe much to that technology, which can track vehicle movements.
	The Bill is neat and valuable, but it must not create any gaps or loopholes in respect of the Act's measures, which some of us spent such an interesting time scrutinising in Committee in 2001. The Minister responsible was my right hon. Friend the Member for Ashfield (Mr. Hoon). Other provisions in the Act also relate to the licensing and registration of vehicles. They ensure that the vehicle licensing process is not open to fraudulent practices, such as those I have referred to.
	The Bill's measures are welcome in as much as they enable the Driver and Vehicle Licensing Agency to conduct its business more effectively in respect of the sale of vehicle registration marks—an area which has been called a "nice little earner" because of the income it can generate—but I encourage the Department for Transport and other stakeholders to undertake a review of the fundamental issues that it is necessary to address to ensure the sustained integrity of the whole registration mark system.
	Technological progress presents us with a dilemma. Automatic number plate recognition enables the police to read up to 50 million vehicle movements per day. Advances in processing and printing technology have been such that more than 35,000 retail outlets—compared with 27,000 just a few years ago—are registered with the DVLA to supply motorists with new and replacement vehicle registration marks, which we refer to more frequently as vehicle number plates. Although one new technology has sought to ensure road-user compliance and to deter criminals, another has provided a gateway for non-compliant motorists and criminals to counter such activity. Sadly, despite our best endeavours when scrutinising the 2001 Bill, there is evidence of a growing incidence of vehicle number plate theft. The number of such offences is about 35,000 per year, which is similar to the number when we previously tried to clamp down on them.
	One moves the goalposts and tries to resolve one problem, but another emerges. Many other countries have introduced better organised systems to manufacture and distribute vehicle number plates that have the provenance of bank notes, in that they are both security printed and distributed. I suggest to the hon. Member for Croydon, South that now may be the time to implement a more appropriate system in the United Kingdom. We discussed this issue in Committee when we considered the 2001 Bill, and at that time it was thought not entirely necessary. I do not want to over-complicate the Bill before us, which I have described as neat and appropriate, but it does give us an opportunity to reconsider that proposal. It has the support of the Association of Chief Police Officers of England, Wales and Northern Ireland. I hope that the hon. Gentleman will take into account its views on the matter, and that the Minister will when he replies. I am sure that ACPO will have been in touch with my hon. Friend, who will outline the Government's position in due course.
	Although the proposal to enhance number plate manufacture and distribution will go some way toward enhancing road-user compliance, it is also appropriate to encourage key stakeholders to review their enforcement strategies. Although number plate manufacture and distribution remains haphazard, the enforcement procedure against non-compliant number plates also lacks the coherence and effectiveness that modern technology would allow us to introduce.
	The MOT regime requires number plates to be compliant, but compliance applies only on the day of the test, and I am also unsure about the rigour with which the requirement is enforced. The Bill is an opportunity for us to revisit the fraudulent use of number plates and to consider introducing greater flexibility to the transfer of cherished number plates, so that it is not just a nice little earner, but contributes to our safety and security and to stamping out the criminal exchange of number plates.
	Should there be changes to the MOT regime to reflect European practice, which is to have the first MOT after four years and then every two years—the first is currently after three years—a lighter touch with road user regulation might well warrant a more forceful touch with number plate compliance. The Bill has great merit in seeking greater flexibility in the transfer of number plates that have particular significance to the present, previous or future car owners, although, as we learned from the hon. Member for Croydon, South, it is a question not of transferring ownership, but of reassigning the number plate. In 2005-06, the volume of such transactions under the cherished transfer scheme was approaching 500,000, and I dare say that it has increased since then, so we need to err on the side of caution when considering how to introduce flexibility.
	The current arrangements are certainly inflexible beyond what is necessary. Only the registered keeper of the donor vehicle is entitled to place a registration mark on retention. Once held on retention, the mark may be assigned only to a vehicle registered in the name of the grantee or the nominee. As entitlement to the registration mark may not be passed on while it is held on retention, the nominee does not have a legal entitlement to the mark before its assignment by the grantee of the vehicle, but that creates difficulties. As has been outlined, the grantee may not dispose of his entitlement to the registration mark, but must remain involved in the process until it is properly assigned to the nominee's vehicle.
	Although I have described how the process could be painful and bureaucratic, even in the hands of well-meaning people, I would want to be sure that all the necessary end-to-end testing has been done on the relevant computer systems to ensure that the greater flexibility that the Bill seeks to achieve would not come at the expense of opening up loopholes. We have all seen how the ineffective scrutiny of computer systems has let down the implementation of all sorts of different policies. Therefore, it is well worth taking the time to ensure that the complex computer systems that underpin the anti-crime and anti-fraud measures that have been introduced in recent years to stop the illegal and inappropriate transfer of number plates are maintained, and that there are no potential loopholes. We must not water down the provisions that we have introduced or undo the good work that we tried to put in place through the Vehicles (Crime) Act 2001.
	We are running to stand still in trying to stamp out the fraudulent use of number plates and transfer of vehicles, and we must take into account all the stakeholders, including ACPO. In considering the Bill, I have looked at the regulatory impact assessment, which covers most of the ground that one would expect. It gives a coherent outline of the rationale for Government intervention in this area at this time, and deals with the consultation. It says that there has been informal consultation
	"between the Agency and representatives of the cherished number industry",
	but that was back in 1999-2000, when it was agreed that the enhancement to the existing retention facility should be introduced at the earliest opportunity. It certainly is not my intention to delay that any further, but the regulatory impact assessment does not refer to ACPO or any of the crime prevention organisations that might take an interest in this. It has considered two options.
	Option one is to continue with the status quo. The only mention in the regulatory impact assessment of the fraud issues that I raised is:
	"The existing arrangements were drawn up very tightly in 1983 to counter problems with abuse of the system. It is the Agency's view that the safeguards resulting from electronic links with the vehicle record now mean that these arrangements are unduly restrictive."
	The changes that were introduced by the Vehicles (Crime) Act 2001 will make a difference, but the investigation into the impact of that change must be thorough to ensure that we avoid some of the difficulties that have arisen from improperly scrutinised changes to important public policy such as we are dealing with in the Bill.
	Option 2 will allow the seller to make a clean-break sale, and the registration mark dealer will have entitlement to the registration mark and thereby avoid the three-cornered sales transactions that can be so tortuous, as the hon. Member for Croydon, South described. For traders who purchase retained registration marks speculatively, the gap between entering an agreement with the vendor and identifying an end client can be lengthy, and under the new facility traders can acquire entitlement to a registration mark from the outset and have much more autonomy over the process.
	I recommend to the hon. Gentleman and to my hon. Friend the Minister that these important fraud issues are carefully considered. When the Minister sets out the Government's position, will he look at the regulatory impact assessment to see whether, as I have suggested, there should be further consultation to ensure that all the loopholes and issues of concern that I have raised can be properly covered? The regulatory impact assessment covers a lot of what we hoped it would cover, and gives quite a good account of why the Government should intervene, although it does not do so as fully as it might.
	I hope that the hon. Member for Croydon, South will see the benefit of considering the issues in more detail. The sheer volume is shown in the regulatory impact assessment. There were 259,599 cherished transfers in 2003-04 and 297,339 in 2005-06; and there were 146,845 retentions in 2003-04 and 189,980 just three years later. That totals 500,000 transactions, and we must keep a close eye on them. There may be savings under the proposed new arrangements for number dealer businesses in the resource and administrative costs associated with contact between trader and vendor, but we must ensure that the efficiency and saving for those involved in the trade is not at the expense of the ability of the police to use automated number plate recognition devices to underpin our safety.
	I am sure that, like all Members who seek to put a Bill on the statute book, the hon. Gentleman will not want a Bill associated with his name to lack proper scrutiny and to have unforeseen side effects and will want people to refer to the Ottaway Act, as I am sure it will be known, not with contempt and disdain, but with admiration and thanks.
	I wish to ensure that, as the Bill moves into Committee—as I hope will be agreed later—scrutiny there picks up on some of the issues that I have mentioned. When my hon. Friend the Minister sums up, I look forward to what he will say to ensure that the Bill does precisely what it sets out to do and does not bring with it all the side effects that I have set out at considerable length. I hope that both the hon. Gentleman and the Minister will understand that, having spent a good number of hours on the Standing Committee of what is now the Vehicles (Crime) Act 2001, I would not want to see all that go to waste while introducing what is in essence a good and appropriate flexibility in relation to this important trade.

Brian Iddon: Being on this side of the House, I would never mention former leaders of the Conservative party.
	I am a driver, and when I drive around the roads of Great Britain I have two hobby-horses—but I can ride only one of them this afternoon: the one about number plates. The second hobby-horse is about the number of vehicles on our roads with inadequate lighting at both front and rear. I know that lights are expensive to renew, but it is dangerous to travel in that way.
	My first hobby-horse is number plate recognition. When I spent 30 days with Greater Manchester police I was on traffic control for two complete shifts in a Range Rover fitted with one of the first pilot automatic number plate recognition readers. I was amazed even at that time—the technology is much better today—by how much information the police drivers could get about a vehicle in front of us. They could tell whether it was a stolen car and whether the insurance and road tax had been paid, and get other information relevant to the work of the police, too. However, there were often problems in recognising number plates, and many of which were personalised, and the Bill is about personalised number plates.
	Undoubtedly, the market for personalised number plates has taken off in a big way. Occasionally I flick through the advertisement pages of my Sunday newspaper, or even the daily papers, and I see long columns of number plates for sale. I must say that they are sometimes rather esoteric, and I wonder whether anyone would ever buy some of the combinations of letters and numbers, but there must be a trade in them. Obviously, people's initials are a driving force. It is often difficult to read the advertisements; I have to take a magnifying glass out occasionally, because they are in such a small font, but perhaps that is because of my age.
	I am astonished by the price of personalised number plates, and some figures have already been mentioned. When I look at the prices, I think that people must have more money than sense, yet the prices are increasing. It astonishes me that people have enough money to part with a third of a million pounds to buy a number plate that they want for one reason or another. MP1 has been mentioned, and I am surprised that that is worth only £20,000. I wonder how much PM1 is worth.

John Randall: First, may I congratulate my hon. Friend the Member for Croydon, South (Richard Ottaway) on his success in the ballot for private Members' Bills and on introducing his relatively uncontentious Bill in the House? I thank the Minister, too, for making the explanatory notes available. Like my hon. Friend, I have some experience as a Friday Whip, and endorse his comments about private Members' Bills. He has chosen a suitable subject, and I congratulate him on his choice. As is the case with many private Members' Bills that we have debated over the years, it is fascinating to see what lines of debate emerge, and we have had an interesting debate about those number plates.
	My hon. Friend made an eloquent case for the measures to simplify the process of buying, selling and transferring vehicle registration numbers that the Bill would introduce. The Conservative Front-Bench team supports everything that he said, with one or two important caveats. I should declare an interest—or perhaps make a confession—as I am the owner of a cherished number plate. I say "cherished" rather than "personalised", because the number plate was purchased by my grandfather about 50 years ago. It was on a company vehicle—hon. Members will probably know that I am an hereditary retailer who has not been abolished quite yet—and as it was part of the fabric of the shop we were reluctant to let it go. In fact, when I go down to the shop, I sometimes think that we are reluctant to let some of the stock go as well.
	That number plate has remained in the family, and it is on my car. It causes problems—it does bring recognition, although it does not cause the populace of Uxbridge to mob me with popular acclaim—as people know where I am, and they may see me, so I have to curtail my otherwise interesting travels around the constituency in case they see my car hanging about outside. I believe, as I have said, that the police would recognise it, but that would only be a good thing in my case.
	As we know, a registration number normally remains with a vehicle until the vehicle is broken up, destroyed or sent abroad permanently. However, as we have heard, because of the widespread interest in personalised registration numbers, special facilities are provided for motorists who wish to transfer their number. Again, speaking from personal experience, I can say that is quite a complicated procedure, although I make sure that it is part of the deal when I buy a new car, whether second-hand or not, that the transfer is included in the purchase price. Another advantage of those number plates is that as one grows older it is more difficult to remember fancy numbers, but it is easy to remember the number plate that one has had for the past 20 years or more.
	The Cherished Numbers Dealers Association says that
	"personalised and attractive number plates have become a growth industry, with thousands of motorists now displaying registrations which perhaps represent their initials or advertise their business or profession".
	Many hon. Members may have seen in the local area around Westminster a firm of well-known plumbers that uses registration numbers such as WC40 or LOO 2 OLD, which is a clever way of using those number plates. One of the Bill's sponsors, my right hon. Friend the Member for East Yorkshire (Mr. Knight), who is a great authority on motoring and classic vehicles, chooses to display his membership of the Privy Council on his number plate.
	The Cherished Numbers Dealers Association has worked hard over the years to ease the process of buying, selling and transferring number plates through its efforts to introduce discipline and high standards into the industry, by encouraging reputable dealers to join an association, as well as its certificated valuation service and strict code of conduct. As we have heard, the association backs the Bill as a welcome simplification to the current system, as does the DVLA.
	Under the present scheme, a vehicle number plate can be held on a retention certificate for 12 months pending its assignment to another vehicle. As we know, while the assignment is pending the number remains the property of the registered keeper. If after 12 months have passed the purchaser has not yet assigned the number, and the registered keeper will not grant an extension or cannot be contacted, ownership reverts to the keeper. There is clearly some potential for fraud inherent in this system.
	As my hon. Friend the Member for Croydon, South made clear, the Bill amends to the Vehicle Excise and Registration Act 1994. Revised subsection (1) and new subsection (1A) of section 26 allow the Secretary of State to make regulations to provide for the granting of a right of retention of a vehicle's number plate to be transferred to someone other than the registered keeper of the vehicle. In other words, the keeper would be able to grant retention rights directly to the purchaser. According to the CNDA, not only would this change make the process of buying, selling and transferring cherished number plates easier for the consumer and the industry, but it would provide greater protection for the buyer, shutting down the existing potential for fraud in the process.

Stephen Ladyman: My hon. Friend is right to highlight that point. My understanding is that the police are comfortable with the proposed change. However, I promise that, if the House sends the Bill into Committee, we will double-check that the police are happy. I assure her that we do not intend to allow changes to the system that would permit fraud, and we do not believe that the Bill would have that effect. However, the retention facility that the measure aims to amend had to be withdrawn in 1977 because of abuses of the scheme. It is therefore important that we are alive to the possibility.
	The increasing value of these marks means that the system is open to abuse, as people will try to find ways to cheat others out of valuable marks and the money that comes with them. The DVLA recognises that there will be circumstances where people will try to cheat the system, which is why the changes have been carefully controlled and the procedures carefully planned.
	I am absolutely confident—and can give my hon. Friends and the hon. Member for Croydon, South my assurance—that there is no way that this reform will make it easier to cheat the system. The Bill does not weaken any existing provisions. If it is implemented, all existing standards and legislation will stay in place. As I said, I will check with ACPO to ensure that it remains happy with the scheme.
	The Bill's purpose is to make people's life just a little bit easier. It will not be necessary to chase the owner of the registration mark each year on retention. The assignment of the right to retention can be made at the point of sale, so people cannot disappear or try to re-sell the mark at any particular time in the future, thereby causing what the hon. Member for Croydon, South identified as a potentially interesting legal situation. We are absolutely confident that these proposals are nothing more than a sensible simplification of the system.

John Hayes: I beg to move, That the Bill be now read a Second time.
	When Members get drawn in the private Member's ballot, a dilemma becomes apparent: should we grandstand on a controversial issue that is bound to attract notice—something spicy and irresistible to press and public, a Bill that embodies contentious sentiments that the promoter believes are vital and essential to whole nation's future, but nevertheless would have no chance whatever of becoming law—or should we opt for a modest, sensible measure that will not make us famous but might have a real chance of moving hearts and minds in the House, thereby changing public policy?
	Despite suffering from the burning temptation that afflicts all who believe that they alone know the solution to the problem of the meaning of life of opting for the first type of Bill, I opted for the second—recalling, as F. D. Roosevelt said, that the "true conservative" is
	"the man who has a real concern for injustices".
	It is thus with great pride and faith in the reason and fairness of my parliamentary colleagues of all parties that I present this Bill to exempt cystic fibrosis sufferers from prescription charges.
	This short, straightforward Bill aims to correct an anomaly—to right a wrong. I will explain why and how, and talk a little about the context, in five points. First, in 1968, the British Medical Association drew up a list of conditions that would thereafter be exempt from prescription charges. They were defined as those
	"readily identifiable conditions, which in virtually all cases call automatically for prolonged continuous medication."
	At that time, the vast majority of cystic fibrosis sufferers died in infancy, and the condition was left off the list because then, as now, children were exempt from prescription charges.
	Secondly, medical advances have, fortunately, meant that the outlook for sufferers has improved markedly over the past few decades. Average life expectancy is now 31 years, but while times have changed for those affected, the conditions that are exempt from prescription charges remain stuck in a 1968 time warp. Adults with cystic fibrosis are therefore still obliged to pay prescription charges.
	My third point is that these are typically people whose education and employment prospects have been profoundly disadvantaged by their ill health. Many are in low income brackets and struggle to make ends meet while coping with a degenerative condition. On top of that, they have to contend with making extra payments for which, according to the British Medical Association's own criteria, they simply should not be liable.
	Fourthly, this anomaly has been recognised for some time by people across the House. It is not a partisan issue. Indeed, my attempt to put it right has received support from Members across parties. Before they came to power in 1997, those who are now in government specifically pledged to deal with this injustice, if enabled by office to do so. Hon. Members will no doubt remember that, in 1994, the Labour party—then in opposition—drew up a paper making exactly the case that I am repeating today. Two years ago, my former colleague, Archie Norman, then the Member for Tunbridge Wells, raised the matter, as I have done, through a private Member's Bill. Sadly, parliamentary time constraints meant that it fell at the first hurdle. I first revived the issue at Prime Minister's questions last July, when I was assured that the Government were reviewing the matter within existing NHS budget constraints. It is no surprise, therefore, that when I was drawn in the ballot for private Members' Bills, I decided to use the opportunity to raise the matter again.
	My fifth point concerns the surprisingly small cost of including cystic fibrosis on the exempt list. Of the 7,500 people in the United Kingdom with cystic fibrosis, about half are aged 16 or over. Roughly a third of those are in higher education, while another third are too ill to work and are in receipt of benefits. That leaves just around a third of the adult sufferers—about 1,250 people—paying prescription charges. Most pay by annual season ticket, which involves the prepayment of £95.30 for a year. This means that the total cost of including cystic fibrosis patients on the exempt list would be less than £120,000 a year. That could certainly be accomplished within the range of the review that the Government are conducting, which assumes that existing NHS budgets would not be exceeded.
	I can tell, however, that questions will be fermenting in the minds of Ministers and perhaps even shadow Ministers: "Why this condition alone? Are not others equally worthy of such an exemption?" The answer is that, unlike some other conditions, cystic fibrosis meets exactly the exemption criteria laid out by the British Medical Association in 1968. It is readily identifiable, and virtually all cases call automatically for prolonged continuous medication.

George Galloway: I begin with this evening's  Evening Standard headline, "East Enders 'need English to win Olympic jobs'", by its Olympics correspondent. The article begins:
	"A call was made today for an English language academy to be set up in the East End to help local unemployed workers benefit from the Olympics.
	A London Assembly report warns that thousands of jobs may fail to materialise, despite pledges to use the 2012 Games as the catalyst to transform one of the country's poorest areas. A third of Newham residents have no qualifications and the lack of basic English skills is a large problem with the high number of economic migrants and refugees...Today's report says English language training is a 'critical piece of the jigsaw' to ensure that local unemployed workers can access the new posts."
	Or we could take the BBC's website this morning, which, under the heading, "Locals 'could miss Olympic jobs'" said:
	"East Londoners face 'real risks' of missing out on new jobs created by the Olympics, the London Assembly has warned...108,000 people of workable age in the Olympic boroughs are unemployed...The London Development Agency said ensuring Londoners benefit from the Olympics was a 'priority'."
	Again, it highlights poor English among local workers as being critical to the problem.
	There has rarely been a more perplexing paradox or bizarre contradiction than the Government's policy of charging for English courses for speakers of other languages from September. Over the past few years, a range of social ills—from the riots that erupted in Bradford, Burnley and Oldham in 2001 to the so-called radicalisation of the Muslim community—has been blamed by Minister after Minister, at least in part, on the failure of groups of citizens to acquire proficiency in English. Indeed, Minister after Minister has beaten a path to east London—so often, that they are unable to answer my parliamentary questions about how often they have been there—to lecture the local people on the concept of Britishness; to lecture them on the need for integration; to lecture them on the dangers of ghettoisation.
	I do not hold with that crude argument, but it poses a problem for the Minister. If the Government believe that a lack of ability in English contributes to something as grave as terror plots being hatched in Britain, why on earth are they making it more difficult for people to join English for speakers of other languages classes from September? For that is what introducing charges and ending the principle of universal access will mean. It always means less take-up. It used to be part of Labour's ABCs that means-testing means less take-up, but that is exactly what the Government now propose for students seeking to study English for whom it is not their first language.
	Working tax credits—the Minister knows something about them—are a case in point. The Minister intends to use entitlement to working tax credit as a criterion for exemption from the charges. So the Government's policy is to make access to English classes dependent on a successful application for benefits that itself demands a high level of competence in English. "Catch-22" is the literature that springs to mind.
	A few weeks ago, a large number of my constituents and those of other hon. Members, such as the Under-Secretary of State for Trade and Industry, the hon. Member for Poplar and Canning Town (Jim Fitzpatrick), who also has responsibility for London, and people from Newham and elsewhere in the east end lobbied Parliament. It was quite a sight and sound, with many immigrant people, including some of the poorest people in London. Most of them were women, including Muslim, African and east European women, who spelled out heartrending pleas—I shall refer to some of them later—to the Government to think again on this issue.
	In my constituency, 70 per cent. or nearly three quarters of the people studying at admirable colleges such as Tower Hamlets college will no longer be able to afford the classes after September and will have to drop out. The college will lose 20 full-time posts, if the charges are imposed, on top of the 35 full-time posts that were lost last year. The Government are imposing a £27 million cut on adult education across London and the axe will fall on those precious, vital courses for people who want to be more British. Some Ministers, such as the Leader of the House, go around demanding that Muslim women take off their veils, but this measure will keep some of those very same women behind a veil of ignorance.
	Ministers say that such provision is expensive. It is expensive at £1 billion, but we are not short of billions of pounds. We just voted in principle last week to expend £25 billion up front—£75 billion over the lifetime—on a new nuclear weapons system. We will spend £10 billion on the Olympic games in the east end, where east enders will not be able to get a job, according to the London assembly, because of their poor English skills. It goes without saying, of course, that we are spending billions of pounds on war. We have also just given a large amount of money away to the richest companies and corporations in this country through the cuts in corporation tax introduced by the Chancellor in the last few days.
	Such provision is expensive, but ignorance is more expensive. What is the price of the alienation, marginalisation, isolation, anger and frustration produced by the ghettoisation of many people who cannot, despite their best efforts, learn the language of the country in which they now live, in which their children were born and are growing up, and in which they will continue to live? They are not people who are here today, gone tomorrow. What greater ghettoisation could there be than to ghettoise people behind a veil of ignorance?
	It is extraordinary that Nazma Begum, my constituent —[ Interruption. ] I hope that the Minister will listen to the words of Nazma Begum at least, although she has not listened to a word that I have said so far. Nazma Begum says:
	"Dear Mr. Galloway,
	I am writing about the money for ESOL classes.
	In a multicultural society we need a common language so that we can communicate with each other effectively. Communication is important to build a good society. English is important for a mother because education begins at home. People can't afford to miss the opportunity of learning the English language. A lot of women are unemployed in this borough.
	Without English it would be impossible to find a job.
	Please help us save ESOL.
	Yours sincerely,
	Nazma Begum."
	Jinette Nsanzugwimo, an African woman, wrote:
	"I am writing about the plans to pay for English classes. I am unhappy about this because I don't have the money to pay.
	I am not working, because I have small children, and I need to learn more English. I need help from you. I am on benefits now, but if my partner gets a job we will have to pay and I will have to leave.
	Please help us save ESOL."
	I shall read just one more, from Nargis Bahar who says:
	"This letter is to tell you how I feel about the plans to end free ESOL. I feel English language is more important because I cannot help my children with their home work. I am different with my children. I cannot explain everything. I feel a gap with my children and me.
	Please do what you can to fight the government's plans."
	It is bizarre, Mr. Deputy Speaker. The Government correctly seek community cohesion in the country, to bring us together, and correctly identify that the lack of a common language for people living in the country is a problem that can lead to many things. We hear often that the security services and the police, for example, are unable properly to relate to some in the communities where problems might be germinating. One of the reasons is the wall, the ghetto, the veil of ignorance of the English language, especially among parents, especially among women. In those circumstances we should be increasing the budget to make sure that everyone living in our country has the opportunity to learn English, but instead we are cutting it, and that just does not make sense.
	The cut represents about £1 million from the budget of large colleges all over the country. Every large college will lose virtually £1 million, with job losses among the admirable teachers—yes—but even more important than that, consigning significant numbers of people to having to drop out of the English classes that they greatly value and love.
	For goodness' sake, with the problems in places such as Oldham, Bradford and east London, where language gave us the reason for raising the issue of veils, for example, with separateness, with not wanting sections of our community to accentuate their separateness, what could do more to break down separateness and bring us all together than ensuring that the country invested in classes for people to learn English? It is frankly bizarre, it is grotesque and unbelievable that the Government, who have so often in east London and elsewhere waved their Union jacks and beaten the drum of Britishness, should be consigning a section of the British population to ignorance in this way—£1 billion for 500,000 people, not all Muslims, not all Africans, not all black.
	Everybody knows about the way our community is developing: immigrants from eastern Europe, central Europe, Africa, Asia, the middle east—some are refugees, but others are migrants who have been given permission to stay here and become citizens, and are aching for the opportunity to learn our language, which is our greatest treasure. It is the language of Shakespeare and our greatest national asset. We ought to be shouting it from the rooftops. We ought to be going round looking for people so that we can drag them into colleges and give them the benefit of learning this wonderful language. Instead, this penny-pinching cut will force ghettoisation and marginalisation on the very people we claim we want to integrate into our society.
	My last point relates to the introduction of means-testing and what used to be the ABC of Labourism and of social democracy. I know that the Minister is going to say that some people will qualify if they apply and if they can fill in the forms correctly, and that, if they apply for working tax credit and can get through the eye of that needle, they will somehow be able to apply for relief from the charges. I promise her—she must know this in her heart—that substantial numbers of poor, immigrant women will not be able to get through the eye of that needle. Some 70 per cent. of my constituents have said that they will have to give up their courses in September. That is a cruel and unnecessary act on the part of the Government and, even at this eleventh hour, I beg the Minister to see sense and think again.

Yvette Cooper: I congratulate the hon. Member for Bethnal Green and Bow (Mr. Galloway) on securing this debate. I assure him that I have listened carefully to the points that he has made. I do not agree with the way in which he has characterised Government policy in this area, but I will attempt to address many of the points that he has made. I should make it clear that we believe that the use of English can only have a positive effect on community cohesion. It is particularly important to underpin not only communities and community relations but opportunities, and in particular the opportunity to work.
	A key element of our strategy to increase race equality and community cohesion is the development of strong and positive relationships between people from different backgrounds in the workplace, in schools and within neighbourhoods. In that context, the ability to understand and converse in a common language is obviously hugely important for all members of society. An inability to communicate in a common language can lead to lost opportunities, division, misunderstanding and isolation.
	Knowledge of English increases both employment prospects and the ease with which people can carry out their day-to-day life in this country. It has an impact on access to public services, but also, critically, on the chances of being able to get a job and to secure income for the future. Research commissioned by the Home Office shows that a person's chances of getting a job are enhanced by something over 20 per cent. if they have a reasonable command of English—the standard we now require for citizenship. Among unemployed ethnic minorities, about 15 per cent. believe that a lack of language skills is a barrier to finding employment. Clearly, we take the issue seriously.
	The Government actively promote language proficiency. Since 2001, we have invested over £1 billion in English for speakers of other languages. Over 1.8 million ESOL learning opportunities have been taken up and over 160,000 learners have achieved a first Skills for Life ESOL qualification. Over the period since 2001, funding and enrolments for ESOL provision have tripled and demand for ESOL provision has substantially increased. That rate of growth means that the Department for Education and Skills has increased the provision and investment in English for speakers of other languages. It has also looked at reprioritising the funding towards those who are in the most vulnerable and disadvantaged groups. That includes those who are out of work through a lack of skills, and settled immigrant communities who are facing challenges when it comes to integration.
	The Department for Work and Pensions recently set out support plans for people in this country who have struggled to get a job because of poor English. Individuals who are eligible for jobseeker's allowance or who are in receipt of income-related benefits will continue to access free ESOL courses through standard learning and skills council provision. From April, Jobcentre Plus advisers will work with jobseekers to agree steps to overcome the language difficulties that prevent them from getting a job. In addition, there are 15,000 places for Jobcentre Plus customers on new targeted provision from the LSC.
	The hon. Gentleman claimed that we were cutting funding for English language training and did not take it sufficiently seriously, particularly as regards employment opportunities, but also in respect of wider opportunities relating to integration and access to services. The Government have taken the importance of English seriously. The fact that we have increased—in fact, trebled—funding in the relatively short period since 2001 indicates the importance that we attach to the English language. He will be aware that the Commission on Integration and Cohesion has made consideration of the role of the English language a key part of its work. As it has made clear, it intends to bring forward final recommendations in the summer, after it has worked up proposals in more detail. We will want to study its recommendations carefully before making any decisions, and we will respond formally to the commission, too.
	We have to recognise that increases in demand for ESOL provision have resulted in pressures on waiting lists for courses in some areas, and in overall pressure on adult learning programmes that cover adult literacy and numeracy skills and other adult employability-level qualifications. That is why the Department for Education and Skills chose to review ESOL spending and announced changes, which are to take effect from August 2007.

George Galloway: I am extremely grateful, given the shortage of time. I welcome the promise to weigh carefully the commission's recommendations over the summer, but will the Minister accept two brief points? First, jobcentre workers have stated, through their union and their professional association, that they are not the best people to teach English to the people who want to learn it. The further education colleges are the professionals in that regard. Secondly, I appeal to her as a feminist woman to accept that many women, such as the wives of restaurant workers in the east end of London, who are not in receipt of benefits and whose children are older, simply do not fit the criteria for support that she outlined. It is those women who will have to give up the classes. Those classes are not a course, but an investment. It is in our interests, not just in theirs, that such people should learn English.